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DONG, Goldman Sachs and Politics

I am by no means an expert on this and I would maintain that the conflict over the sale of some 19% of the shares in DONG to Goldman Sachs remains a sideshow in the developments which eventually led to the breakdown of the SD-SL-SF coalition. Still, I have a feeling that lots of different issues have been bundled in the public debate so I wanted to try and sort the different threads of discussion out.

1. DONG was originally created to give the state control over the distribution of natural gas in Denmark – this applied to the infrastructure while regional public companies were in charge of delivering gas to users. The basic infrastructure and delivery has since been merged but the original policy choice was one of creating public control with what was seen as an essential part of the energy infrastructure.

2. DONG has since branched out fra distributing natural gas to developing renewable energies (in particular wind energy solutions), and from being a utility company acting on the Danish market to an entrepreneur acting on a global market.

3. This also changes the original logic behind DONG which these days is much more of a commercial corporation than when it was originally established. This also raises the question if the Danish state is appropriate an an owner of a commercial global corporation. At the same time, this also raises the question who should own and control Danish energy infrastructure: The Danish state or private actors.

4. The choice of Goldman Sachs as the partner of the Danish government is controversial for a number of reasons. First, we should note that the Danish government have two different motives for bringing Goldman Sachs (or rather: An investment bank) on board: a. To attract capital in the short run and b. to prepare an IPO for DONG in the medium run.

5. I suspect that b. is the real issue here: First, we have the underlying conflict over the privatisation of DONG. Second, in preparing the IPO the investment bank should act as the agent of the Danish government which is the principal in the relationship.

6. Given the track record of Goldman Sachs, outside observers question if Goldman Sachs is a reliable agent. Remember that we are talking about an organisation which refers to its customers as “muppets”.

7. Also, the use of tax havens raises the issue of Goldman Sachs’ fidelity towards public principals.

8. Finally, there is the symbolic role of Goldman Sachs in the developments leading to the 2008 financial crisis. By striking a deal with Goldman Sachs, the Danish government is (again symbolically – but symbols are important in politics) seen as accepting dubious financial practices which have inflicted heavy losses ordinary voters in the form of a complete absence of economic growth since 2008 and substantial cuts in social protection.

PS: Guan has discussed the specifics in the deal between the Danish government and Goldman Sachs and is sceptical of the result.